Wireless as an investment opportunity.
JohnG
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To: LBstocks who wrote (9652)
From: Ruffian
Wednesday, May 3, 2000 10:35 AM ET
Reply # of 9677
SMARTMONEY.COM: Wild for Wireless
Dow Jones Newswires
(This report was originally published late Tuesday.)
By Elizabeth Harris
NEW YORK -- A cell phone in every hand; a wireless fund in every
portfolio. That's the hope of mutual fund companies rushing to market with
new funds devoted to the wireless communications field. Within the past
few months, four wireless funds and unit investment trusts have opened and
at least two others are in the works.
So far, the new funds have had no trouble raising money. After launching a
little over two months ago, the Guinness Flight Wireless World fund (sorry,
no snapshot available) has gathered $35 million in assets. Some funds can't
attract that much in two years. The one-month-old Wireless Fund (sorry,
no snapshot available), a joint venture between Value Trend Capital
Management and Berkshire Capital Holdings, has raised $10 million in just
four weeks. Additional wireless funds are expected soon from Profunds
Mutual Funds and Turner Investment Partners. A bit earlier on the scene,
Nuveen rolled out a five-year unit investment trust (UIT) devoted to the
wireless sector last November followed by a 15-month wireless UIT in
March.
As every tech investor knows, wireless stocks have been going wild lately.
And fund families are sniffing an opportunity. Stocks like Nextel
Communications (NXTL), Qualcomm (QCOM) and Ericsson (ERICY)
are up 300% and more over the past year. "We've gotten calls from
investors looking for wireless funds," says Brian Ferko, a product manager
at Turner.
But do fund investors really need a wireless fund? Presumably technology
funds already have this field pretty well covered. And then there are the
telecom funds, which all own wireless stocks like Nokia (NOK),
Vodafone Airtouch (VOD) and Ericsson. But the Dow Jones Wireless
Index suggests there's more out there. That index lists 17 holdings from
around the world with a combined market cap of $905 billion.
"Telecom is not the same as wireless," says Jim Atkinson, a managing
director at Investec Guinness Flight Global Asset Management. "You're
investing in copper wire with telecom, not the shift to wireless. And we felt
the need to take advantage of this."
Guinness Flight's Wireless World is being managed by Nigel Dutson, Seth
Kirkham and Adrian Brass. All three joined Guinness from Schroder
where Dutson was a portfolio manager and Kirkham and Brass were
analysts covering Internet technologies and telecom. Its top three holdings
are well-known wireless blue chips Vodafone Airtouch, Nokia, and
Ericsson. But it intends to invest in a range of companies with operations in
wireless technology. A less traditional wireless holding is Scandinavian
bank MeritaNordbanken, which is developing a remote, online payment
system together with Nokia and Visa.
"We want the fund to invest in those innovative companies," explains
Atkinson. "We're so early in the shift to wireless." And as its name
suggests, the fund takes a global view. Right now, about 42% of its
holdings are in foreign companies.
Value Trend's Wireless fund is managed by Jeff Provence and Malcolm R.
Fobes III, who separately manage the Value Trend Large-Cap (sorry, no
snapshot available) and Berkshire Focus (BFOCX) funds. They hatched
the idea for their new fund almost a year-and-a-half ago when they were
comparing notes on their respective funds' large weightings in wireless
stocks. "It was so clear that wireless was going to be huge," Provence
says.
In contrast to Guinness Flight, the Value Trend fund has more of a
domestic flavor. Right now the bulk of its assets are invested in U.S.
stocks. Top holdings include Nokia, Qualcomm, RF Micro Devices
(RFMD) and Triquint (TQNT). "Our portfolio is really focused on
components - semiconductors, LED panels, the people that are getting into
the wireless Web," says Provence. He divides the fund's assets into three
categories, explaining that 45% are world leaders like Nokia, 25% are
midsize companies with strong earnings like SanDisk (SNDK) and 25%
are less high-profile, but innovative companies like Tekelec (TKLC).
As with all technology sector funds, volatility may be the biggest challenge
these funds face. Atkinson watched the Wireless World fund climb to a
peak gain of 12.8% on March 10, then sink into negative territory as the
Nasdaq slid. It's now down 9.8% since launch. Value Trend's Wireless
fund has done a little better. It's climbed 3.95%.
ProFunds Chairman and CEO Michael Sapir declined to comment on his
firm's upcoming Wireless Communications UltraSector ProFund, which is
expected to go live mid-June. Like other ProFunds enhanced index funds,
it will offer leveraged returns based on an index. It has not yet identified
which wireless index it will track.
In July, Turner Investment Partners plans to open the Turner Wireless &
Communications fund. According to SEC filings, prospective holdings will
range from small companies developing new communications technologies
to large established firms. And for investors who prefer the tax-efficiency
of a UIT, Nuveen's Wireless 15-Month Sector and Wireless Five-Year
Sector portfolios are also available. Holdings include Nextel
Communications, Lucent Technologies (LU) and Nokia.
Guinness Flight's Atkinson isn't worried about the new competition entering
the field. Says he, "The more people that come in, the more legitimate the
category."
For more information and analysis of companies and mutual funds, visit
SmartMoney.com at smartmoney.com
Briefing Book for: ERICY | LU | NOK | NXTL | QCOM | RFMD | SNDK | TKLC |
TQNT | VOD | S.ERC | U.VOD | Y.NOK |
